which multi-family to choose

Question

Does anyone have any recommendations or opinions about whether a first-timer should choose a duplex or fourplex?

I've had one real estate agent tell me (while I was painting her home) that for someone who's brand new, it's smarter to start with a duplex and that jumping right into a fourplex would be biting off more than you can chew.

I can imagine that's maybe because it's more work and responsibility.. but I'm wondering if there are other technicalities and details that a newbie may not realize right away that made her provide that suggestion. (?)

I understand that house hacking in your first duplex generally won't produce nearly as much cash flow as house hacking in a fourplex. So, what are the downsides of taking on a fourplex?

I appreciate any feedback and thoughts from this community :)

Carly Turow · Answer

Awesome @Jody Sperling that's good to hear! My boyfriend has been resistant to "settling" for a duplex (which was initially my idea because an old co-worker did a duplex as her first step and it worked out well) and he really doesn't want to invest in a first step that won't produce a significant source of passive income right out of the gate. Your feedback helps me feel a bit relieved that maybe it's not as huge and intimidating as I assumed. Thanks so much!

Jody Sperling · Answer

The only downside to house hacking a 4-plex is if the property is not a true 4-plex. Here in Omaha we have a large number of midtown properties that were converted at some point into three- and 4-plexes. These tend to be a bit awkward, like when your cousin shows up to the party uninvited.

If you're looking at a true 4-unit property, jump on it as the lion jumps on the gazelle. Regardless of the challenge, more cashflow is better, and the worst mistake you can make with a single family home or duplex you get the benefit of escaping with better tenants in two of the other properties.

The RE agent is giving you bad advice this time. Won't be the last time either. Ask her/him if s/he's ever owned a 4-plex. I'm guessing not. Best of luck!